Miley Cyrus was scratched by a cat. A man tickled two girls on a playground slide, and he didn’t even know the girls. TV newsrooms judged that these recent stories were more important than world crises, voter anxiety and rebellion, student debt, or the federal debt.

Ah yes, the federal debt. In the last 50 years we’ve only managed to balance the federal budget twice, in 1999 and 2000. President Clinton worked with the “Contract With America” Congress to make it happen. Back in 2000 the nation’s debt was $5.6 trillion, or 54% of GDP.

Now it’s $19 trillion—more than 100% of GDP—up from $18 trillion at the beginning of 2015. It got there by blowing through the debt ceiling again and again, as TV announcers solemnly described the awful things that would happen if we didn’t raise the debt ceiling …Otherwise, they never discuss the federal debt at all, even though it will be a bigger burden on today’s students than their student debt.

Economists always used to recommend that we cut spending and pay down debt during economic expansions, knowing that spending increases automatically when a recession unfolds. What really happens is that Congress and the President always spend more than they collect in tax revenue, regardless of whether they collect a little or a lot.

Economists also recommend that the Federal Reserve raise interest rates during an economic expansion, and then force rates lower in the ensuing recession to encourage people buy homes and cars. When the next recession does arrive, we’ll look back and wonder how we managed to squander a ten-year-long opportunity to get our fiscal house in order.

Most of Europe has the same problem, and Japan is already in crisis. In each of these nations social spending has grown rapidly, while all other forms of spending have barely grown at all.* In every developed nation, the retirement of the Baby Boomer generation is causing a sharp increase in retirement and health care spending. These “mandatory” spending increases will eventually bankrupt our Social Security and Medicare programs, and force dramatic spending cuts around the world.

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*In the United States in 1962, Social Security was just 13.5% of the federal budget, and Medicare didn’t exist at all. Today Medicare is 15% of the budget; Social Security is 24%, and other “Health” spending has grown to 13% of the budget (more than half a trillion dollars), up from just 1% of the budget in 1962.

Why pick 1962? JFK was the nation’s president, and American involvement in the Vietnam was still quite limited. Yet defense spending was 54% of the federal budget. Since then health care spending has grown by a trillion dollars a year, and it’s still growing rapidly. 36 million Americans lack health insurance, and our population is aging. Government policy has driven up the cost of health care, and incentivized colleges and universities to refuse to offer health benefits to professors and other employees. Meanwhile, every day, 10,000 Baby Boomers stop paying taxes, and begin drawing Medicare and Social Security benefits.

** An American Promise **

● A Balanced-Budget Amendment to the Constitution, with appropriate exceptions for times of war and recession.
● A line-item veto, to give the President a fighting chance to eliminate pork and earmarks.
● A limitation on federal spending, to 20% of GDP.

** Building A Million Dollar Retirement Portfolio **

Remember that it's your money. If you live above your means, using borrowed money to do so, then the banks and money-lenders will own what should have been your retirement savings when you hit retirement age. This is especially true if you use borrowed money throughout your working years to purchase things that you want but do not necessarily need. Distinguish clearly between what you need and what you want. In the end, the fiscally prudent will own the fiscally profligate, and this applies equally to households, businesses and governments. If you think being a diligent saver will tank the economy, think again. The banks will lend money to those who spend it; investments in in mutual funds and individual stocks (i.e., publicly-held companies) will go back into the economy in the form of salaries, product development, plant expansion, and countless other ways. By saving or investing, your role has gone from being a direct consumer of goods and services to an indirect consumer. Unless you lock it in a vault or stuff it in a mattress, the money hasn't left the economy.
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